HSBC just bought SVB for £1. Should I invest in the FTSE 100 bank?

HSBC (LSE: HSBA) Shares have been in freefall since buying £1 from Silicon Valley Bank UK arm a little over last week. And overall, the FTSE 100 Bank shares have dropped a staggering 19% in just a month. Do I need to take some battered shares to bargain at the right time, or am I looking at a risky value trap?

A smart buy?

After the opening of the Silicon Valley Bank cylinder happened last month, banks around the world are in crisis.

The U.S. government avoided the worst of the state’s problems by bailing out parts of U.S. businesses. Here in the UK we watch as HSBC takes control of SVB’s UK arm with pound coins.

To me, this £1 purchase looks like a smart acquisition. After all, SVB has money to fulfill customer transactions The problem is that the cash is tied up in long-term investments that are not chosen.

And I don’t expect liquidity problems to be a difficult problem to overcome for a FTSE 100 bank like HSBC with a $3trn balance sheet.

Crucially, it gave me the opportunity to take on 3,500 tech companies as customers and about £1.4bn in equity for less than it cost me to get on the bus.

And if it’s a smart buy, then it might be a good time for me to get some shares. However, before jumping in with both feet, I’m a little concerned that the stock has nosedived 18% since the start of March.

Banks in crisis

The bigger problem for HSBC is that confidence in banks has been shaken, and to a degree it may not have seen since 2008.

recent events have led to the active collapse of Credit Switzerland. The Zurich-based bank needs a £45bn emergency loan from the Swiss government and will be bought out USB for a fraction of the market value has been just last week.

Other banks are also suffering. In the last month of trading, the stock in NatWest down 9%, Lloyds 14% and Barclays 24%. I do not currently have shares in any of them, but I have considered buying all of them in the past.

So it might be a bunch of cheap stocks that I can find at a low price, or it might just hold the parcel as it quickly drops to the bottom.

Maximum panic

“Fear when others are greedy, and greed when others are afraid.” Warren Buffett’s famous quote explains one of the most difficult things to do, to gain an advantage in the market.

If I can buy when stocks are undervalued because investors are panicking, I can walk away with huge returns. Anyone who bought at the lowest point of the 2020 Covid dip can probably agree.

Yes, the banking sector is in a troubled place (can’t say), but banks are big and important institutions. HSBC has been operating for 143 years and generates $52bn in revenue annually. It’s not going away anytime soon.

Therefore, the bigger issue for me is whether we have reached maximum panic. So, I will be adding the stock to my watchlist and may pick up some stocks in the future.